Cryptocurrencies have yet to be regulated in Brazil. The Brazilian Central Bank has issued statements regarding the risks posed by this type of currency and its lack of guarantee by the monetary authorities, and has advised that companies that trade in virtual currencies are not regulated, supervised, or licensed to operate by the Bank. Recently, the Brazilian Securities and Exchange Commission issued a statement saying, among other things, that cryptocurrencies could not be classified as financial assets and could not be acquired by investment funds. A bill of law currently under analysis in the Brazilian Chamber of Deputies seeks to include virtual currencies and air mileage programs under the supervision of the Brazilian Central Bank.

I. Brazilian Central Bank

A. Policy Statement No. 25,306 of February 19, 2014

On February 19, 2014, the Brazilian Central Bank (Banco Central do Brasil, BACEN) issued Policy Statement No. 25,306 on the risks related to the acquisition of the so-called “virtual currencies” or “encrypted currencies” and transactions carried out with these currencies.[1] The purpose of the statement was, inter alia, to clarify that virtual currencies should not be confused with electronic money (moeda eletrônica) as defined in Law No. 12,865 of October 9, 2013, and its regulations.[2]

“Electronic money” is defined in article 6(VI) of Law No. 12,865 as a resource stored in a device or electronic system that allows the final user to make payment transactions in the national currency (Brazilian Real).[3] In contrast, the statement explained that virtual currencies are denominated in a different unit of account from the currencies issued by sovereign governments and are not stored in a device or electronic system in national currency.[4]

According to the statement, the usage of virtual currencies and whether the regulation applicable to financial and payments systems applies to them have been the theme of international debate and public announcements by monetary authorities and other public institutions, with few concrete conclusions thus far; virtual currencies are not issued or guaranteed by a monetary authority; these virtual assets are not regulated or supervised by the monetary authorities of any country; there is no government mechanism that guarantees the value in official currency of those instruments known as virtual currencies; and BACEN is monitoring the evolution of the usage of these instruments, as well as the related discussions in international forums—especially regarding their nature, ownership, and functioning—in order to possibly adopt measures within its sphere of legal competency, if necessary.[5]

B. Communiqué 31,379 of November 16, 2017

In another statement associated with the growing interest of individuals and companies in virtual currencies, on November 16, 2017, BACEN warned of the risks derived from storing and negotiating virtual currencies and reiterated that these currencies are neither issued nor guaranteed by any monetary authority.[6]

The statement further detailed that companies that negotiate or store virtual currencies on behalf of their owners, be they persons or companies, are neither regulated, licensed to operate, nor supervised by BACEN; there is no specific provision governing virtual currencies in the legal and regulatory frameworks associated with the National Financial System; and BACEN, in particular, neither regulates nor supervises transactions involving virtual currencies.[7]

The statement again reminded persons that virtual currencies are not to be confused with e-money, which is defined in accordance with Law No. 12,865 of October 9, 2013, and controlled by BACEN regulations approved under the guidelines of the National Monetary Council.[8]

In addition, the statement noted that carrying out international wire transfers referenced in foreign currencies through the use of virtual currencies and related instruments does not exempt companies from the obligation to comply with foreign exchange rules—especially the rule establishing that this type of transaction may only be performed by institutions authorized by BACEN to operate in the foreign exchange market.[9]

II. Brazilian Securities and Exchange Commission

On January 12, 2018, the Brazilian Securities and Exchange Commission (Comissão de Valores Mobiliários, CVM) issued Statement No. 1, which was addressed to officers responsible for the administration and management of investment funds regulated by CVM Instruction No. 555 of December 17, 2014, that are investing in cryptocurrencies.[10]

The Statement noted that both in Brazil and in other jurisdictions the legal and economic nature of these investment modalities has been discussed, without having, especially in the domestic market and within its internal regulation, reached a conclusion on such a conceptualization.[11] Therefore, based on this uncertainty, the interpretation of the CVM’s technical area is that cryptocurrencies cannot be classified as financial assets for the purposes of the provisions of article 2(V) of CVM Instruction 555/14, and for this reason its direct acquisition by regulated investment funds is not allowed.[12]

The Statement further explained that other inquiries have also reached the CVM regarding the possibility that investment funds may be set up in Brazil for the specific purpose of investing in other investment funds incorporated in jurisdictions where they are admitted and regulated that in turn have as their strategy the investment in cryptocurrencies, or investing in derivatives allowed to be traded in regulated environments in other jurisdictions.[13] In this regard, the CVM emphasized that the existing discussions about the investment in cryptocurrencies, both directly by funds or in other way, are still in an initial stage and coexist with current Bill of Law No. 2,303/2015 (discussed below), which may prevent, restrict, or even criminalize the trading of such investment modalities.[14]

The CVM concluded that, based on its understanding of the technical area, it is undeniable that there are still many other inherent risks associated with such investments (such as cybersecurity and privacy risks), and with the future legality of their acquisition or trade, and that considering all these variables it was not possible for the CVM to reach a conclusion regarding the possibility of the constitution and structuring of indirect investments in cryptocurrencies. Therefore, in view of these circumstances, the CVM advised managers of investment funds to await further and more conclusive guidance from the CVM on the subject in order to structure indirect investments in cryptocurrencies as described, or even in other alternative forms that seek this nature of investment.[15]

III. Bill of Law No. 2,303 of 2015

A Bill of Law that would amend Law No. 12,865 of October 9, 2013, which provides for payment arrangements and payment institutions that are part of the Brazilian Payment System, and Law No. 9,613 of March 3, 1998, which provides for crimes of money laundering or concealment of assets and the prevention of the use of the financial system for the illicit activities foreseen in Law No. 9,613, is currently under analysis in the Brazilian Chamber of Deputies.[16]

The Bill would provide for the inclusion of virtual currencies and air mileage programs in the definition of “payment arrangements” under the supervision of the BACEN, and would require individuals and companies engaged in investment businesses to closely monitor deals involving virtual currencies and air mileage programs for crimes of money laundering or concealment of assets.[17]

Law No. 12,865 currently defines “payment arrangement” as a set of rules and procedures that regulate the rendering of a particular service to the public that is accepted by more than one recipient, through direct access by end users, payers, and recipients.[18]